Money vs. Land

We live in a world of abundance yet simultaneous poverty. We can no longer blame famine, war, or lack of technological progress for the poverty that remains an inextricable part of human experience. Nor can we blame a debt-based monetary system alone for our state of affairs. Although money buys power, it can only do so, by and large, in an economic system in which wealth cannot easily be created due to the ownership and hoarding of land. Human beings need land even more so than they need money; the monopoly of land—not the monopoly of money—is the primary driver of poverty and inequality.1 Once we understand that the issue is lack of affordable access to land, and therefore to community, we understand why the value of land has to be shared.

Economists worldwide have already laid much of the scientific groundwork for the effectiveness and validity of community land contributions.2 People unfamiliar with land contributions often wonder if these contributions will raise the cost of housing. However, as we shall see in this chapter, land actually becomes more affordable because land will no longer be hoarded. And since revenues from land contributions will diminish or even eliminate the need for conventional taxes, goods and services will become significantly more affordable. The end result is that homeowners are likely to incur net savings due to diminished or eliminated taxes and considerably lower costs of living.

Community land contributions only burden property owners who don’t put land to efficient use. Tenants are unaffected because tenants already pay for the benefits they receive from the communities they’re living in, except that they’re paying their landlords instead of their communities. In other words, since tenants already pay land contributions to property owners, land contributions are already included in landlords’ profits if they rent their properties out; if property owners try to pass community land contributions on to their tenants, and thus charge tenants twice for the community benefits tenants receive, they’ll find that the property rental market will simply accommodate the tenant with another property owner who’s willing to accept less of a profit.3

Nevertheless, community land contributions provide a win-win for everyone, since real-estate developers can still gain from the value of the housing they provide; they just won’t be able to profit as much from land anymore. And because community land contributions will lead to an overall increase in wealth for society while preventing a greater increase in the cost of living, community land contributions are extremely beneficial for tenants as well.

Our current laws and practices don’t support the dream of affordable housing for the average person. Meanwhile, homeowners with expensive mortgages are burdened by their liabilities; our current system doesn’t easily allow them to sell their homes and rent instead. Flawed economic policies meant to encourage homeownership—and thereby land ownership—are rotten at their core because they’re built on the assumption that land ought to be owned and profited from. As a result, such policies gear us to consider short-term self-interest at the expense of common interests, and therefore at the expense of our own long-term self-interest.

Gentrification and Rent Control

Currently, property owners can profit from land while tenants cannot. Because tenants aren’t able to profit from land, they usually end up being gentrified out when rents increase. Unfortunately, in our current economic model there are few things communities can do short of implementing rent control to prevent rents from increasing; higher rents are a natural byproduct of increased affluence for a given area. Because this affluence is only pocketed by property owners and financial institutions and not shared with all residents, rent control often seems like the least bad option in the fight against gentrification. But rent control comes with a host of negative side effects, including a shortage of housing and lower-quality housing, and doesn’t serve the community in the long run.4

Universal Basic Income

What’s required is an entirely new mechanism by which higher rents are shared with all residents—property owners and tenants alike. One effective way to do this is through the issuance of a partial Universal Basic Income to all residents, financed entirely from community land contributions. A Universal Basic Income, only when exclusively derived from community land contributions, has the effect of preventing gentrification: When tenants receive a Universal Basic Income, they’re able to afford the higher rents, which they pay to their landlords, who in turn have to pay more money to their local community and provide better services to their tenants. The community, in turn, then shares that added revenue with all community members—and everyone wins.

Homelessness

Having one’s own home can tremendously ease one’s mind in a way that few other things in life can; the homeless are often painfully aware of this reality because they lack that psychological security. While some people tend to believe that the homeless are either lazy or mentally incapable of earning enough money to afford a place to live, few people consider the principle that land has to be shared with all human beings—regardless of whether a person contributes to society or not. This is because no human being has made land; therefore no human being has a justifiable right to marginalize another person from land. Furthermore, all of us need land, just like we need air to breathe.

Since everyone has a basic right to land, it’s society’s duty to provide a minimum standard of free land access to all its members. It can do this for property owners and tenants by providing them with a Universal Basic Income; the homeless, however, should also be given the option of free public housing (the cost of which can be deducted from their Universal Basic Income share) so that they can have accommodations without living in fear of being evicted. To provide the homeless with free housing also makes sense on a financial basis, since the cost of providing housing for the homeless often tends to be significantly less than the actual welfare costs and societal burdens that are created by homelessness.5

Land is a universal human right. Consider how important it is for the human mind to have a ground to call its own! But in order for everyone to have their own ground, the value of land has to be shared, and housing has to be provided to those who live on the margins.

Land belongs to the people, yet the homeless are not only homeless—they are landless. Their poverty is less a reflection of their inability to sufficiently provide for themselves in a predatory economic system, and much more a reflection of our collective ignorance. Once we realize that everyone has a right to land—and therefore, to shelter—and once we realize how we commoditize this right to the highest bidder, it becomes apparent how we each are complicit in each other’s poverty. It is therefore up to all of us to do our part in alleviating poverty and creating, in the words of Charles Eisenstein, “the more beautiful world our hearts know is possible.”

Footnotes

1The documentary “Real Estate 4 Ransom” poses a rhetorical question that drives this point home: “If you had all the money in the world, and I owned all the land, what would I charge you for your first night’s rent?”

But let the facts speak for themselves: For most of its existence, the U.S. economy operated on sound money prior to the establishment of the Federal Reserve in 1913, yet in settled parts of America people nonetheless experienced extreme wealth inequality as well as economic booms and busts. Not so in frontier towns, however, where land could still be had for very little: Wages there tended to be comparatively high, opportunities for employment were great, and economic booms and busts did not exist.

3 Economists throughout history have clearly stated that land contributions will not raise the rents of tenants but will eat into the profits of landowners, who do little work for the income they receive. Adam Smith recognized this back in 1776 in his work An Inquiry into the Nature and Causes of the Wealth of Nations:

“A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground… Whether the tax was to be advanced by the inhabitant, or by the owner of the ground, would be of little importance. The more the inhabitant was obliged to pay for the tax, the less he would incline to pay for the ground; so that the final payment of the tax would fall altogether upon the owner of the ground-rent.”

4 This brings to mind an anecdote: A friend of mine paid for a rent-controlled apartment in San Francisco and left it empty while he lived elsewhere for a year. By retaining his rent-control privilege, he was able to avoid paying a higher rent upon his return to San Francisco and ended up saving money despite having paid for two apartments for an entire year. Laws against such behavior are futile; but if we change the underlying economic incentives, we can avoid the need for such laws altogether. For a good microeconomic perspective on the side effects of rent control, see this YouTube video.

5 For example, the annual cost of emergency room visits and jail stays for the homeless in San Francisco was estimated in 2004 to be approximately $61,000 per person, whereas the cost of providing a homeless person with permanent housing, treatment, and care was estimated at only $16,000. See Angela Alioto, et al. “The San Francisco Plan to Abolish Chronic Homelessness,” June 30, 2004, San Francisco Mayor’s Office of Housing and Community Development.

Vandana Shiva, an internationally recognized Indian activist and philosopher, explains that planning for the human being rather than the automobile can liberate space and create community within a city. In her opinion, a sustainable city should operate as a self-reliant and self-sufficient cluster of villages.